AU Optronics’ shares rise after new ADRs proposal

IMPROVEMENTS:One of the nation’s leading flat-panel makers released plans to issue new US depositary receipts to fund production materials, reulting in a rise in shares

Staff writer, with CNA

Shares of AU Optronics Corp (AUO, 友達光電), one of Taiwan’s leading flat-panel makers, soared 6.64 percent yesterday after the company announced a plan to issue new American depositary receipts (ADR) to finance purchases of production materials, dealers said.

Many investors also hoped that AUO would benefit from a recovery in the long-depressed flat-panel sector and see its share price rise ahead of the ADR sale, they said.

The stock price of AUO rallied to NT$12.85 yesterday, out-performing the benchmark TAIEX, which inched up 0.22 percent.

“It has been a pattern in the market that a stock will rise after its company announces a fund-raising plan to set a satisfactory issuance price,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said. “AUO is benefiting from such a pattern, in particular, as the flat-panel industry is recovering.”

In a filing with the Taiwan Stock Exchange, AUO said that it plans to issue between 640 and 800 million new shares to expand its current ADR program.

The announcement echoed AUO’s statement made at an investor conference on Feb. 6 that it might raise funds to expand operations in order to meet demand.

While AUO said the timing of the ADR plan will depend on market conditions, the market widely expects the new shares to go on sale no later than June.

“Although AUO said that the funds raised from the ADR sale will be used to buy production materials, I think the company may use the money to pay off some of its debt to improve its financial structure,” Hsu said.

According to AUO, the company had NT$54.11 billion (US$1.8 billion) in debt growth within one year and an additional NT$169.02 billion in long-term debt as of the end of the fourth quarter last year.

Although AUO incurred a net loss for the ninth consecutive quarter in last year’s October to December period, it was less than the loss suffered a quarter earlier, Hsu added.

In the fourth quarter of last year, the company posted a net loss of NT$13.17 billion, down from its third-quarter loss of NT$16.48 billion.

The fourth-quarter loss included write-downs for asset impairments and losses booked on its investment in the solar energy industry, Hsu said.

“AUO is intensifying its efforts to roll out large-sized panels for television use which requires higher gross margins, and its plant depreciation costs are expected to fall,” Hsu said. “So it’s possible the company will break even this year.”

AUO President Paul Peng (彭雙浪) said that its clients are expected to restock their inventory in March in a bid to meet rising demands in time for the May 1 Labor Day holiday in China.

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